- Inner-city rental prices have trended downwards over the past year
- Sydney and Melbourne were particularly hard hit, due to restrictions
- There are signs of recovery - or least a stabilisation - in the markets
Inner-city rental prices have trended downwards since the onset of the pandemic, especially across Sydney and Melbourne.
While rents have fallen 4.9% in Sydney, the Victorian capital city saw its unit rents fall 8.2%, according to CoreLogic.
The major declines were found in inner-city areas such as Sydney’s city and inner south (-14.5% fall), which accounts for almost one in five of the investment units in the harbour city. Melbourne’s inner region accounts for over 45% of its city’s investment unit stock, and its rentals fell 19% over the past year.
Perhaps this comes as no surprise, as these are areas would have otherwise been occupied by overseas university students or international migrants. Covid put paid to both groups, with the logical impact on their associated property sectors.
While CoreLogic assesses these areas are “far from recovery”, there are signs that these markets at “stabilising”, especially in Sydney.
Median rents in the inner south and central Sydney area has recovered 6% from their December low of $500 per week.
Rental stock is now falling in both Melbourne and Sydney, and although Melbourne’s inner-city rents fell a further 3.8% in the March quarter, the stock of available rentals fell more than 9% in the period. In Sydney, stock fell more than 15%…
Total rent listings – inner-city Melbourne (blue line) and Sydney (black)
Why the stabilisation?
Eliza Owen from CoreLogic suggests the following reasons as to the levelling out of the two inner-city rental markets:
- economic activity is improving, and Covid restrictions have eased;
- higher employment levels in hospitality, tourism and the arts;
- improved foot traffic in the CBD (albeit still 50% below pre-pandemic);
- opening of domestic borders, and today’s New Zealand-Australia travel bubble;
- investors cashing out, selling their listings has taken some rentals off the market.
“While conditions across inner-city apartments seem to stabilising, it is clear the Melbourne apartment market has a long way to go before rents see a more consistent recovery trend.”
Eliza Owens, Head of Residential Research Australia, CoreLogic
This may be further hampered by the construction pipeline, where recently released ABS building activity data showed there were still 43,302 apartments under construction across Victoria through the December quarter, she said.
“The return of international visitation to Australia has previously kept the Melbourne rental market buoyant amid high levels of new supply. A full recovery in rental incomes across Melbourne units is unlikely under international arrivals are closer to pre-COVID levels,” said Ms Owens.